Apple Beats Targets as Quarterly Sales Drop 3%, Services Revenue Hits Record $20.9 Billion

Apple’s revenue declined again in the March 2023 quarter, marking its second consecutive quarterly drop in sales. But the tech giant topped Wall Street forecasts, with its services business hitting a new record for revenue and iPhone sales showing unexpected strength.

The company reported revenue of $94.8 billion, down 3%, and net income of $24.2 billion ($1.52 per diluted share), a 3.4% year-over-year drop, for the quarter ended April 1, which is Apple’s Q2 of fiscal 2023. Financial analysts expected revenue of $92.96 billion and earnings of $1.43 per share for the quarter, per Refinitiv data.

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Apple’s Services revenue rose 5.5%, to $20.9 billion, edging above $20.8 billion for the year-end 2022 quarter. The segment includes the App Store, Apple Pay, and subscription services such as Apple TV+, Apple Music and iCloud.

In the quarter, the company reached more than 975 million paid subscribers for digital services (which includes both Apple-branded offerings like Apple Music and Apple TV+ and services via third-party apps), up 150 million over the last 12 months, according to CFO Luca Maestri.

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Apple expects year-over-year revenue performance in the June 2023 quarter to be similar to the March quarter (i.e., a decline comparable to the 3% in the most recent period), assuming “the macroeconomic outlook does not worsen,” Maestri said. He said Services segment revenue will show growth in the June quarter similar to the most recent quarter, but called out headwinds in digital advertising and mobile games.

Analysts had expected sales of Apple’s flagship iPhones to decline about 4% — but smartphone sales were up 1.5% year over year, to $51.3 billion (an all-time high for a March quarter). Dragging down the company’s top line were its Mac unit, with sales plunging 31% to $7.2 billion, and iPad, which saw revenue drop 13% to $6.7 billion. Sales in Apple’s Wearables, Home and Accessories segment declined 0.6%, to $8.76 billion.

“We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high,” CEO Tim Cook said in announcing the March quarter results. “We continue to invest for the long term and lead with our values, including making major progress toward building carbon neutral products and supply chains by 2030.”

Apple also announced that its board authorized an additional $90 billion for share repurchases and declared a cash dividend of 24 cents per share (an increase of 4%).

In his prepared remarks on the earnings call, Cook called out Apple TV+’s launch of Season 3 of Jason Sudeikis comedy “Ted Lasso” and the service’s Oscars win for “The Boy, the Mole, the Fox and the Horse” in the animated short category. He also boasted that the recently launched Apple Music Classical app, with more than 5 million tracks, has the biggest classical music catalog in the industry.

Next month Apple is hosting its annual Worldwide Developers Conference (WWDC) in Cupertino, Calif. The event, which runs June 5-9, is rumored to feature the company’s long-awaited mixed-reality headset, reportedly dubbed the Reality Pro.

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